Feds rethinking popular -- but expensive -- 'Cash for Clunkers' program

Holy hot rod, Batman! You'd best race down to the Batmobile dealership before the government pulls the plug on Cash for Clunkers.

WASHINGTON -- The White House said today it was reviewing the government's popular "cash for clunkers" program amid concerns the $1 billion budget for rebates for new auto purchases may have been exhausted in only a week.

Transportation Department officials called lawmakers' offices earlier today to alert them of plans to suspend the program as early as tomorrow. But a White House official said later the program had not been suspended and officials there were assessing their options.

The White House said auto dealers and consumers should have confidence that transactions under the program that already have taken place would be honored.

The program, called the Car Allowance Rebate System, known as CARS, offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle.

Congress last month approved the program to boost auto sales and remove some inefficient cars and trucks from the roads. The program kicked off last Friday and was heavily publicized by car companies and auto dealers.

Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting the suspension.

A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet been approved by NHTSA, or nearly 13 trades per store. It raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.

"There's a significant backlog of 'cash for clunkers' deals that make us question how much funding is still available in the program," said Bailey Wood, a spokesman for the dealers association.

Alan Helfman, general manager of River Oaks Chrysler Jeep in Houston, said he was worried that the government wouldn't pay for some of the clunker deals his dealership has signed because they aren't far enough along in the process.

His dealership has done paperwork on about 20 sales under the clunker program, but in some cases the titles haven't been obtained yet or the vehicles aren't yet on his lot.

"There's no doubt I'm going to get hammered on a deal or two," Helfman said.

The clunkers program was set up to boost U.S. auto sales and help struggling automakers through the worst sales slump in more than a quarter-century. Sales for the first half of the year were down 35 percent from the same period in 2008, and analysts are predicting only a modest recovery during the second half of the year.

So far this year, sales are running under an annual rate of 10 million light vehicles, but as recently as 2007, automakers sold more than 16 million cars and light trucks in the United States.

Even before the suspension, some in Congress were seeking more money for the auto sales stimulus. Rep. Candice Miller, R-Mich., wrote in a letter to House leaders yesterday requesting additional funding for the program.

"This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn," Miller said Thursday. "The federal government must come up with more money, immediately, to keep this program going."

Michigan lawmakers planned to meet on today to discuss the program.

Brendan Daly, a spokesman for House Speaker Nancy Pelosi, D-Calif., said they would work with "the congressional sponsors and the administration to quickly review the results of the initiative."

General Motors Co. spokesman Greg Martin said yesterday the automaker hopes "there's a will and way to keep the CARS program going a little bit longer."